Soaring gasoline prices and trillion-plus federal deficits set the stage for a dramatic standoff Thursday between Senate Democrats and top oil company executives who vigorously defended billions in annual tax breaks for the oil industry.

At issue is whether the Big Five oil companies – which together made more than $35 billion in profits in the first quarter of 2011 – need help from taxpayers, especially with oil selling for more than $100 a barrel.

“Businesses should make a profit – that’s what drives our economy. But do these very profitable companies actually need taxpayer subsidies?” said Sen. Max Baucus (D) of Montana, chairman of the Finance Committee, in his opening statement. “We can put this money to better use.”

Legislation pending in the Senate would cut tax breaks to the top oil producers by $21 billion over 10 years – and use the savings to reduce the national deficit. Industry CEOs say such a move would be discriminatory and would hurt US jobs and their ability to compete for resources with giant, state-owned rivals.

The CEOs represented companies ranging from Exxon Mobil, which made $10.7 billion in profit in the quarter ending March 31, to BP America, which is still recovering from the Gulf oil spill. Others included Chevron, Conoco Philips, and the US branch of Royal Dutch Shell. [Editor's note:The original version misstated Exxon Mobil's profits.]

The CEOs asserted that the proposed tax changes would discourage domestic production, cut jobs, and raise the costs of energy to American consumers.

“It is not simply that [the proposed tax changes] are misinformed and discriminatory. They are counterproductive,” said Exxon Mobil CEO Rex Tillerson. The way to reduce energy prices and raise revenue for government is to lift restrictions on developing “our nation’s enormous untapped energy supplies,” he added.

Shell CEO Marvin Odum cited examples of how US regulatory policy curbed the development of new energy resources, especially in Alaska and the Gulf. “At the invitation of the federal government, we have invested more than $3.5 billion since 2005 to develop energy resources in Alaska,” he said. “Six years later, we have been prevented from drilling a single exploration well due to the government’s inability to deliver timely permits to allow this potential resource to be developed."

Questions from the panel reinforced partisan themes. Republicans, whose ranks were depleted because several members were at the White House to discuss deficits and debt, focused on the need for a national energy policy. Sen. Orrin Hatch (R) of Utah, the top Republican on the panel, dubbed the hearings a stunt to raise taxes and score political points.

“No matter what the question is, it seems that for the president and some of my colleagues, the answer is always raise taxes,” he said. “Oil and gas companies would probably drill with or without these tax incentives. But let’s be clear: They would be less likely to do so in the United States.”

But the thrust of questions from the panel did not focus on how the oil industry conducts its business, but rather on whether Big Oil is doing enough to help reduce deficits – an effort that is so far falling hardest on poor families dependent on government services for health, education, and welfare.

“This is going to be incredibly difficult,” said Senator Baucus. “Everyone is going to have to give in a little bit.”

Sen. Charles Schumer (D) of New York asked the CEOs for yes or no responses to questions such as, “Do you think that your subsidy is more important than the financial aid we give students to go to college?"

Sen. John Rockefeller IV (D) of West Virginia, the great-grandson of the founder of Standard Oil, pressed them on how much they understood of Congress’s cuts to Medicare, Head Start, and health care to date. “I think you’re out of touch, deeply and profoundly out of touch, and committed to sharing nothing,” he said.

“You always prevail in the halls of Congress, and you do that because of your lobbyists and friends in the halls of power,” he added, at the end of the hearing. “Not once in this hearing have I heard any semblance of a willingness to share unless all companies have to…. Our people across the country are suffering in ways that you have no idea of, and I think that’s sad.”

The tax-writing Finance Committee has long been a key target for oil industry campaign contributions, but mainly to Republicans, according to the Center for Responsive Politics in Washington. The industry contributed $3.06 million to senators on the panel in the 2010 campaign cycle, 77 percent of that to Republicans.

Republicans stuck mainly to partisan themes. It’s a “travesty” that the US still does not have an energy policy, said Sen. Olympia Snowe (R) of Maine.

The GOP-controlled House on Wednesday approved legislation that requires federal regulators to make decisions on offshore drilling permits within 60 days. If an answer is not forthcoming by that time, the permit would be granted by default.

The bill to cut tax subsidies for the top five oil companies will come to the Senate floor next week, says majority leader Harry Reid (D) of Nevada.

“The CEOs of the five biggest oil companies proved our point,” he said in a statement after Thursday’s hearing. “They failed to explain why American taxpayers should continue throwing their hard-earned money at oil companies that are raking in record profits. We should be using that money to pay down the deficit, instead of cutting vital programs like cancer research and student loans,” he added.

In floor speeches on Wednesday, Democratic Sens. Mary Landrieu of Louisiana and Mark Begich of Alaska spoke out against axing tax breaks for the oil industry, dimming prospects that this proposal will ever become law.

As the panel closed, Baucus appealed to the five CEOs to go home and say, “Maybe we could contribute a little bit more.” “I’m not totally convinced that these provisions add that much to your decisions about where you invest or don’t invest … given the huge profit margin that exists,” he said.